Bookkeeping is a critical financial activity that every business, large and small, must get right. While tons of business owners understand the importance of bookkeeping, they may decide against hiring a professional because they feel there is not enough work for an in-house employee. In such instances, both business owners and startups can either do their own bookkeeping or choose to outsource it to professionals and firms that offer flexible service packages and payment plans. Doing your own bookkeeping may not seem intimidating in the beginning, but the workload quickly adds up and it is not the most efficient use of your time. Here are a few reasons you should consider outsourcing bookkeeping needs.
4 Reasons Why You Should Outsource your Bookkeeping
#1. Your focus should be on core business activities
Doing your own bookkeeping may save a few hundred dollars, but core business activities are how the business generates revenue and stays afloat. Even if you can do a fantastic job managing your books, it is hardly the most efficient and profitable use of your time.
This is even more important when your business is heavily reliant on your skills or expertise, as is the case in the service industry, where even a few hours of your time spent away from the business can hurt your revenue.
#2. You are just starting out
Getting your books in order from the beginning is one of the smartest bookkeeping moves you can make. Before you even make any money, a bookkeeping professional can help you understand your projected expenses and all laws and regulations you need to observe.
Often, business owners ignore this step and start out on their own, only to end up with messy books that require time-consuming and relatively expensive cleanup services.
#3. Your accounts are currently a mess
If you have been doing your books on your own and your accounts are already a mess, the next best time to hire a bookkeeper is right now. Most bookkeepers offer cleanup services where they comb through your accounts and transactions to rectify any mistakes you have been making. The longer you continue to conduct business with messy books, the longer your cleanup will take.
#4. Cost savings over time
If you currently have an in-house professional but your transactional volume is low, you are likely to be overpaying and underutilizing the resource. In case you are doing your own bookkeeping, there’s is a greater chance you may make payments incorrectly over time.
Unpaid bills and outstanding tax payments attract late fees and penalties, which can quickly add up. Outsourcing your bookkeeping to a professional will not only ensure that you pay for the work you need but will also save you money that would otherwise go into said penalties.
6 Simple Steps to Outsourcing your Bookkeeping:
If you have decided that you would like to outsource your bookkeeping, here are simple steps you can take.
#1. Determine your current bookkeeping costs
Before you begin searching for bookkeeping services, you need to determine your own budget and costs. If you are doing your own bookkeeping, you have to calculate how much time you spend on it as well as what that time is worth to you.
This amount, based on the opportunity cost of your time, can serve as a good indicator of what the activity is costing you and how much you should be able to spend on bookkeeping services.
#2. Make a list of all bookkeeping requirements and challenges
In order to hire a suitable firm or a professional, you will need to understand and communicate your needs. Often small business owners skip this part and have a difficult time making decisions when they are provided options and payment plans by prospective bookkeepers.
- Requirements & challenges may include:
- Average number of transactions per week/month
- Average monthly revenue and expenses
- Average number of clients, accounts or vendors
- Number of current employees and future growth plans
- Payroll tax frequency
Having this information handy will help you and a prospective service communicate more efficiently and chalk out a plan of action quickly.
#3. Collect all relevant data from the existing setup
When you outsource bookkeeping, you will also need to provide all the relevant documents, past receipts, invoices, tax returns and passwords for online portals and bank account information to the new service.
Collect the information now, so you do not have to run around and waste time after having hired the new service.
#4. Start researching options
You do not want to hire the first service you find. Switching bookkeepers can be a time-consuming and often frustrating experience, which is why you should hire a reliable service that you feel comfortable with and can also build a solid working relationship.
Ask for references from friends and business associates if possible. Searching online for local bookkeeping firms will also help, and you should be able to shortlist a few options to consider.
#5. Interview prospective services properly
Start communicating with your shortlisted services and do not hesitate to ask anything that you feel is important.
Some of the questions you should ask can include:
- Prior experience working with a similar business or in the same industry
- Costs and fees, payment options (hourly billing, per-project fees)
- Details of the services provided for the costs
- Mode of operation (work remotely or visit your business occasionally)
- Things required from your end (documents, account details, passwords)
- Any recommendations that may help your business in particular
#6. Backup your existing software and data
Before you hand things off to your new bookkeeper, you should backup your existing software and accounting data as a precaution. This way even if something goes awry, your past data is protected and can be easily restored.
The process of outsourcing your bookkeeping to a new firm can take weeks at the very least, and the final piece of advice is to be patient throughout the process and focus on communication and working with your new firm or bookkeeper until they are comfortable and you are satisfied.